Labor Laws Hindering India’s Growth

“Deadly labor wars hinder India’s rise,” wrote The Wall Street Journal last month. In spite of Prime Minister Manmohan Singh’s efforts to reform India along free-market lines, the country’s long history with socialism continues to keep it from truly embracing capitalism.

Battle lines are being drawn in labor actions across India. Factory managers, amid the global economic downturn, want to pare labor costs and remove defiant workers. Unions are attempting to stop them, with slowdowns and strikes that have led at times to bloodshed.

Workers are so passionate because they feel that India’s newfound prosperity has hardly made their lives any better. Companies blame union leaders for enflaming such discontent for political reasons while decade-old labor codes are in desperate need of reform. “We can’t be a capitalist country that has socialist labor laws,” says the president of the Automotive Component Manufacturers Association of India.

India’s economy has experienced a steady 8% growth rate during the past several years. Its middle class had widened and its domestic consumer base, in both cities and the countryside, has grown with it. But the country’s manufacturing sector, after producing an impressive growth rate of 7 percent until last year now feels the effects of the global turndown and must make some unpopular cutbacks. “The unrest serves as a reminder that India has far to go before it stands alongside the world’s other economic powerhouses,” according to the Journal.

Thomas Barnett shares this sentiments and adds that that other rising power, China, has very much the same problem, “for all the same reasons plus the added burden of heavy corruption.” No matter how fast both countries have grown over the last decade, they still have to do away with the remnants of socialism to clear the path to becoming economic giants.